PAC slams Ministry for local commercial investment failures

13 July 2020: The Public Accounts Committee has severely criticised central government for complacency as local authorities put £7.6bn into risky commercial property investments.

In a hard-hitting report, the Public Accounts Committee (PAC) has severely criticised the Ministry of Housing, Communities and Local Government (MHCLG) for failing to properly oversee the local government prudential framework in England.

The National Audit Office (NAO) reported earlier this year on the huge rise in local authority investment going into commercial property, with £1.8bn invested in 2016-17, £2.6bn in 2017-18, £2.2bn in 2018-19 and £1bn in the first half of 2019-20. This compares with the £200m spent on commercial properties in 2015-16.

ICAEW submitted evidence to the inquiry.

Key findings and recommendations from the PAC report include:

  • More active oversight of the prudential framework is needed, including publicly challenging local authorities where there are concerns.
  • MHCLG’s failure to ensure local authorities adhere to the spirit of the framework has led to some local authorities taking on extreme levels of debt.
  • Requirements to set aside money each year to service debt (the Minimum Revenue Provision) should be strengthened.
  • Actions taken to address risky and non-compliant behaviour have been too little and too late.
  • A ‘soft’ approach of guidance changes has not worked, and ‘hard’ more timely and effective interventions are needed, with rigorous post-implementation reviews.
  • The local government prudential framework has been impaired and now requires a fundamental review.
  • MHCLG does not have access to the data it needs to carry out its oversight responsibilities.
  • External audit has a role to play, but more important is real-time scrutiny of commercial investment strategies and investment decisions.
  • Local governance arrangements are not robust enough, with investments not being properly transparent or subject to adequate scrutiny and challenge.

The PAC is particularly critical of the Ministry for taking four years between identifying that local authorities were starting to ‘borrow for yield’ to making more substantive changes to Public Loan Work Board lending rules. This was despite NAO and PAC reports highlighting the issue in 2016.

The PAC also highlights significant shortcomings in data, with MHCLG ‘flying blind’ as local authorities borrowed billions of pounds. It also doesn’t feel that lessons have been learned about capturing data on emerging and future commercial investment activities and not just about investments that have already been made.

Commenting on the report Alison Ring, Director for Public Sector at ICAEW, said: “This is a hard-hitting report from the Public Accounts Committee that severely criticises the Ministry for Housing, Communities and Local Government for complacency about the huge expansion in debt-financed commercial property investment by English local authorities over the last four years.

The PAC rightly focuses on the importance of data in carrying out central government’s oversight role, enabling better understanding and analysis of risks in local authority balance sheets. Stronger governance at a local level is also needed, with improved transparency and scrutiny needed both before, and after, investments are made.

However, it is important that any changes to the prudential framework do not prevent local authorities in making essential investments in local infrastructure and in encouraging local economic activity as the country emerges from lockdown.

Supporting the economic recovery may involve councils taking on more – rather than less – balance sheet risk, making the PAC’s recommendations about strengthening both local governance and central oversight even more critical.”

This article was originally published by ICAEW.

Universal Credit improves but attracts NAO criticism

14 July 2020: The National Audit Office has stated that vulnerable claimants struggle with Universal Credit and face financial difficulties, while administration costs are still too high.

The National Audit Office (NAO) has issued a new report on the troubled Universal Credit welfare benefit that is in the process of replacing six existing benefits. The report states that the Department for Work Pensions (DWP) should do more to support vulnerable people and others who struggle to make a claim. 

With many more people on Universal Credit, the NAO reports that the number of people paid late increased from 113,000 in 2017 to 312,000 in 2019. As a proportion this was an improvement, going from 55% to 90% paid on time, but for those paid later than the scheduled five weeks the average additional delay was three weeks. Some 6% of households (105,000 new claims) waited around 11 weeks or more for full payment.

The NAO also reports that the cost of implementing Universal Credit had risen from £3.2bn to £4.6bn, not including the effect of the coronavirus pandemic. The average cost of administrating each claim has fallen to £301, but this is still higher than the DWP business case target for 2024-25 of £173 per claim.

Many of the payment delays affect vulnerable claimants and others who struggle to make a claim, especially as many are in financial difficulty before they apply. Nearly half have not been earning in the three months before claiming, while many are already in rent arrears. Claimants with more complex needs and circumstances, such as people with learning difficulties, can struggle to engage with the claims process or to provide the evidence required, leaving them at greater risk of being paid late.

Around 57% of households making a new claim obtain an advance payment, but this can lead to further financial hardship and debt when that advance is deducted from subsequent payments. The proportion is much higher for more vulnerable claimants, including the very poorest, those with disabilities or those with children with disabilities.

The NAO says that the DWP has been doing well in paying proportionately more people on time and has made improvements to its systems to address problems that were blocking large numbers of payments. However, the NAO also found that the DWP needs to better understand and address the needs of people with more complex claims.

Fraud and error are listed as “major issues” in the report, with over one in ten pounds paid through Universal Credit being incorrect. The DWP estimates that £1.7bn (9.4% of claims) was overpaid in 2019-20 and that 1.1% of claims were underpaid, the highest error rate for any benefit outside of tax credits. These errors contributed to the NAO qualifying the DWP’s 2019-20 accounts for the 32nd year running earlier this month.

The NAO’s work relates to the period before the coronavirus pandemic caused a significant jump in the number of claims for Universal Credit (over three million since the beginning of March). Dealing with vulnerable claimants will be even more critical if they are not to slip through the safety net.

Commenting on the report Alison Ring, director for public sector at ICAEW, said:

“The NAO report highlights how challenging implementing Universal Credit has been and how many vulnerable claimants are struggling financially. It complements the DWP on improvements to date but reports that late payments are still a significant issue – as are fraud and error.

Although the DWP appears to be making better progress in rolling out Universal Credit than before, it is still not expected to be fully implemented for several years to come. It remains a complex welfare benefit and more thought should be given to its design and how it could be improved to reduce delays, reduce the need for advance payments and reduce the likelihood of error and fraud.

The NAO also highlights the challenges that DWP is currently experiencing, with over three Universal Credit claims since the beginning of March.”

This article was originally published by ICAEW.

ICAEW chart of the week: Fiscal interventions

10 July 2020: Fiscal interventions reach £190bn as the Chancellor Rishi Sunak pours even more money into the economy in an attempt to keep it from stalling.

Components of £190bn in fiscal interventions - as set out in text below.

The Chancellor’s summer statement is the subject of this week’s #icaewchartoftheweek, with the £30bn ‘plan for jobs’ being the latest in a series of fiscal interventions in response to the coronavirus pandemic.
 
The measures announced included £9bn for a £1,000 job retention bonus for furloughed workers, £4bn for work placements and boosting work searching, skills training and apprenticeships, a £5bn boost for the hospitality and leisure industries in the form of a cut in VAT and discounts on eating out, and £12bn in economic stimulus. The latter includes over £5bn on infrastructure projects (as announced by the Prime Minister last week), £3bn to make homes energy-efficient and £4bn for a temporary cut in SDLT on housing sales under £500,000.
 
This brings the total amount of fiscal interventions to £190bn or around 9% of GDP, once an extra £33bn in spending on health and other public services is incorporated. This was also ‘announced’ yesterday, albeit by means of a small footnote buried inside one of the accompanying documents!
 
As a consequence, the fiscal interventions can be broadly split between £77bn being spent on supporting household incomes (£54bn on the furlough scheme, £15bn on the self-employed income support scheme and £8bn on universal credit), £30bn to support businesses (£13bn in business rates and other tax reliefs and £17bn in grants and other support), £53bn for public services and other (£39bn on health and social care and £14bn on public services and other spending), and £30bn in economic stimulus through the ‘plan for jobs’.
 
Businesses have also benefited from support with their cashflows through the deferral of £50bn in tax payments and £73bn of loans and guarantees.
 
This is not the end of the story for fiscal interventions. Not only are there are a number of sectors such as local government, universities, and manufacturing where rescue packages may be needed, but the Chancellor made clear that this announcement only covered the second of a three-phase response.
 
The third phase – rebuilding the economy – will be set out later in the year. How much additional money will be involved is anyone’s guess.

This article was originally published by ICAEW.

Further fiscal interventions focused on post-furlough future

9 July 2020: Chancellor announces £30bn in new measures to support, protect and create jobs, bringing total fiscal interventions to £190bn.

The Chancellor used his summer statement speech to set out a phased approach to the UK Government’s response to the coronavirus pandemic.

The first phase – the existing measures already taken during the pandemic – was about the protection of the economy during lockdown, while the second phase – the subject of yesterday’s announcement – is about jobs. The third phase – to be announced later in the year – will be about rebuilding the economy and investing for the future.

As anticipated, the summer statement promised substantial sums to support the economy as it emerges from lockdown, with the Plan for Jobs including £30bn in additional funding measures to support, protect and create jobs through economic stimulus.

  • £9.4bn – Job Retention Bonus: £1,000 for keeping furloughed staff on until January
  • £2.1bn – Kickstart work placements for those aged 16-24
  • £1.6bn – boosting work searching, skills and apprenticeships
  • £4.1bn – temporary cut in VAT on hospitality, accommodation and attractions
  • £0.5bn – discounts on eating out
  • £5.6bn – infrastructure investment announced by the Prime Minister last week
  • £1.1bn – public sector and social housing decarbonisation
  • £2.0bn – grants to make private homes more energy-efficient
  • £3.8bn – six-month cut in stamp duty to stimulate the housing market

This takes total fiscal interventions announced by the government to around £190bn, including the £1.3bn for cultural institutions announced a few days ago.

When combined with lower tax revenues, this is expected to result in a fiscal deficit in 2020-21 in excess of £300bn. A better estimate should be available next week from the Office for Budget Responsibility when it updates its short and long-term forecasts.

The amounts above do not include tax deferrals and business loans and guarantees, which have now reached a total of £123bn.

It is as yet unclear whether there will be any statements about the planned third phase on rebuilding the economy before the Budget and spending review later in the autumn when plans for 2021-22 and beyond will be set out in more detail. 

There was significant disappointment in some quarters that the National Infrastructure Strategy, originally scheduled to be published in March, has still not been published.

For those trying to track the fiscal position this year, this is unlikely to be the last fiscal announcement that will move the dial. The government has indicated that further funding is likely to be made available later in the year to local government on top of the £2bn package announced last week. Rescue packages may also be needed for vulnerable sectors such as universities.

This article was originally published by ICAEW.

NAO qualifies DWP accounts for 32nd year running

6 July 2020: The National Audit Office reports that overpayments from fraud and error reached their highest ever estimated rate in 2019-20. COVID-19-driven claims since March are likely to increase this even further. 

The Department of Work & Pensions (DWP) published its annual report and financial statements for the year ended 31 March 2020, containing a qualified audit opinion for the 32nd year running due to the material level of fraud and error in benefit expenditure.

The audit report from the independent National Audit Office (NAO) contains a clean opinion on the truth and fairness of DWP’s financial statements for 2019-20. However, the Comptroller & Auditor General Gareth Davies (the head of the NAO) has qualified the second part of his audit opinion with respect to overpayments attributable to fraud, error where payments have not been made for the purposes intended by Parliament, and for overpayments and underpayments that do not conform to the relevant authorities.

Excluding the state pension, where the level of fraud and error is relatively low, the estimated level of benefit overpayments increased to an estimated £4.5bn (4.8%) in 2019-20 from £3.7bn (4.4%) in the previous financial year. Underpayments were estimated to amount to £1.9bn or 2.0% of the relevant benefit expenditure. 

The NAO reports that overpayments of Universal Credit increased from 8.7% to 9.4%, which is the highest recorded rate for any benefit other than tax credits. It says the most common cause of fraud and error is incorrectly reported income (leading to £1.4bn of overpayments and £0.35bn of underpayments), followed by incorrectly reported savings (at a value of £0.9bn).

NAO head Gareth Davies issued a press release commenting on his concern that the level of error and fraud in benefit payments has risen again – and highlighting the likelihood of even higher levels as a consequence of relaxed controls at the DWP during the coronavirus pandemic.

Commenting on the report Alison Ring, director for public sector at ICAEW, said: “Although the National Audit Office is quite right to stress how important it is that the DWP does more to reduce the incidence of fraud and error, it is likely that the increase seen in 2019-20 is primarily as a consequence of the further rolling out of Universal Credit, a complex welfare benefit which is inherently prone to error and more vulnerable to fraud than many other benefits.

“As well as investing more in tackling individual cases of fraud and error, the DWP may want to give further thought to the design of Universal Credit and how it could be improved to reduce the likelihood of error and fraud in the first place.

“The relaxation of controls over benefit payments during the coronavirus pandemic has helped get financial support to claimants in quite often severe financial difficulty, but that has come with the prospect of much higher levels of fraud and error in the current financial year. Reducing the levels of both over- and under-payments will be a big challenge for the DWP, especially if there is further large surge in claims as the furlough scheme comes to an end in the next few months”.

The Department for Work & Pensions Annual Report & Accounts 2019-20 and the associated NAO press release are publicly available.

This article was originally published by ICAEW.

ICAEW chart of the week: UK population in lockdown

3 July 2020: Only a fraction of the population was working at their normal workplace during the Great Lockdown, but what will happen as businesses start to re-open and the furlough scheme becomes less generous?

UK population 67m: workforce 34m (working at workplace 9m, working from home 10m, furloughed 12m, unemployed 3m); outside workforce: children & students 16m, retired 12m, other inactive 5m.

The #icaewchartoftheweek takes a look at the workforce this week, illustrating how the lockdown has transformed the world of work over the last three months.
 
Our (admittedly) back of the envelope calculations based on ONS and HM Treasury data suggest that only around 9m of the 34m strong workforce have been working normally at their ordinary places of work during the lockdown, with somewhere in the region of 10m working remotely. In addition, just under 12m workers have been furloughed, comprising 9.3m employees on the coronavirus job retention scheme (CJRS) and 2.6m self-employed on the self-employed income support scheme (SEISS).
 
Unemployment, which was around 1.2m back in February, has jumped to an extrapolated estimate of around 2.7m by the end of June and is likely to grow still further as the furlough scheme becomes less generous from 1 July. The ONS’s experimental claimant count metric, which includes a wider group of workers needing financial support from the state, had reached 2.8m by the end of May and is expected to have exceeded 3m by the end of June.
 
The overall workforce of 34m excludes the 33m ‘economically inactive’ half of the population, comprising 16m children and students, 12m retirees and 5m other inactive individuals. The 2.1m students over the age of 16 included in this category excludes around 1m or so students with part-time work or who were looking for work prior to the lockdown who are included in the workforce numbers, while retirees include around 1.2m below the age of 65 who have taken early retirement. Other inactive individuals between the ages of 16 and 64 include 1.8m homemakers, 2.3m disabled or ill, and 1.1m not working for other reasons.
 
These numbers are a moving target as more workers will start to return to their normal workplaces over the next few weeks as the economy starts to re-open, even if many continue to work from home where they can. More worryingly, unemployment is likely to rise significantly with the furlough scheme requiring an employer contribution from July onwards and when it comes to an end in October.

This #icaewchartoftheweek was originally published by ICAEW.

New funding package for English local authorities

2 July 2020: Secretary of State Robert Jenrick has announced a new £2bn package for English councils to replace lost income and cover spending pressures.

The government has announced additional funding for local authorities in England to help alleviate the financial pressures they are under. This follows on from our previous article on council funding pressures, which reported that total lost income and additional expenditure could amount to £9.4bn by next March.

The funding package announced today comprises £500m to cover incremental expenditures being incurred by councils – adding to the £3.2bn already provided – together with a reimbursement scheme covering up to 71% of lost income from sales, fees and charges.

The reimbursement scheme kicks in where losses are more than 5% of a council’s planned income from sales, fees and charges. The government will cover 75% of the lost income above 5%, meaning that councils will need to cover around 29% of the shortfall from their own resources. Depending on the final details, councils could receive somewhere in the order of £1.5bn and £2bn to replace lost income.

The Ministry of Housing, Communities & Local Government (MHCLG) also announced that councils would be able to phase repayments of council tax and business rates deficits over three years rather than one, reducing cashflow pressures on councils. However, the apportionment of irrecoverable council taxes and business rates will not be decided until the Spending Review in the autumn.

This announcement should significantly reduce the risk of councils needing to issue s114 ‘bankruptcy’ notices – for the next few months at least.

Commenting on the announcement Alison Ring, ICAEW Public Sector Director, said: “Although the new funding won’t cover all the expenditure and lost income councils have suffered due to coronavirus, it should be enough to help most get through the rest of the summer, and the prospects of some having to declare themselves bankrupt with s114 notices should recede for now. 

However, we’re concerned that councils will still have to cut back spending to cover the lost income from areas such as car parking, leisure centres, planning fees and other charges that are not being covered by central government. This has the potential to damage local economies just as they are trying to recover.”

This article was originally published by ICAEW.

Local authorities running out of money as COVID costs mount

2 July 2020: English councils have warned that £6bn more funding may be needed to keep operating through the rest of the financial year.

Data collected by the Ministry for Housing, Communities & Local Government (MHCLG) from 339 local authorities in England indicates that councils expect lost income and additional expenditure as a consequence of the coronavirus pandemic to amount to a total of £9.4bn.

Many councils are warning that they may not be able to continue operating without further infusions of cash from central government. Although £3.2bn has been provided by central government to date, this has only covered lost income and additional expenditure incurred up to the end of May 2020, with councils forecasting a further impact of £6.2bn over the remainder of the financial year.

Table 1 – English local authorities: financial impact of the coronavirus pandemic

 March
2020
£bn		April & May
2020
£bn		Forecast to
March 2023
£bn
Total
£bn
Lost income  0.17 1.82 3.70 5.69
Additional expenditure 0.08 1.17 2.46 3.71
Total covid-19 impact 0.25 2.99 6.16 9.40

Source: Ministry of Housing, Communities & Local Government, ‘Local authority COVID-19 financial impact monitoring information’.

Lost income is expected to reach in order of £5.7bn overall, while additional expenses are forecast to reach around £3.7bn. Further detail is provided in Table 2 and Table 3 below. 

With no additional funding as yet forthcoming, councils have been using their reserves to cover shortfalls during June. A number of local authorities are now discussing the possibility that that they may have to issue s114 ‘bankruptcy’ notices, which would require them to freeze all non-statutory expenditures, severely affecting local services.

The Chancellor is expected to announce further financial measures when he updates the nation next week and councils are hoping this will include more funding from central government in line with the encouragement they received at the outset of the lockdown to “do whatever it takes”.

Alison Ring, director for public sector at ICAEW, commented: “These numbers from English local authorities highlight just how severe the financial impact of the coronavirus pandemic has been. The £3.2bn in additional funding from central government announced so far is only a third of the estimated total of £9.4bn in lost income and additional expenditure expected to be incurred.

There is a risk that without clarity on further funding that some councils will start issuing s114 ‘bankruptcy’ notices. This would significantly reduce spending by local authorities at the same time that local economies need every bit of help they can get if they are to fully recover.”

Table 2 – English local authorities: lost income

 March 2020
£bn		April & May 2020
£bn		Forecast to
March 2021
£bn
Total
£bn
Business rates  0.03 0.44 0.72 1.19
Council tax 0.02 0.48 1.21 1.71
Sales fees and charges 0.08 0.65 1.15 1.88
Commercial income 0.03 0.17 0.45 0.65
Other 0.01 0.08 0.17 0.26
Lost income 0.17 1.82 3.70 5.69

Source: Ministry of Housing, Communities & Local Government, ‘Local authority COVID-19 financial impact monitoring information’.

Table 3 – English local authorities: additional expenditure

 March
2020
£bn		April & May 2020
£bn		Forecast to
March 2021
£bn
Total
£bn
Adult social care  0.03 0.50 0.97 0.50
Children’s social care 0.00 0.08 0.22 0.30
Housing (excluding HRA) 0.01 0.06 0.12 0.19
Environment and regulatory services 0.01 0.09 0.11 0.21
Finance & corporate services 0.01 0.08 0.11 0.20
Other service areas 0.02 0.36 0.93 1.31
Additional expenditure 0.08 1.17 2.46 3.71

Source: Ministry of Housing, Communities & Local Government, ‘Local authority COVID-19 financial impact monitoring information’.

This article was originally published by ICAEW.

UK aircraft carrier groups won’t be operating to full extent until 2026

26 June 2020: NAO reports on challenges remaining to the Carrier Strike programme, including cost overruns since their last report in 2017.

The National Audit Office (NAO) has published the latest in a series of challenging reports on defence procurement with a critique of the Ministry of Defence (MoD) programme to establish two fully operational carrier strike groups.

This is a complex multi-year effort that has seen the building of the HMS Queen Elizabeth and HMS Prince of Wales aircraft carriers at a cost of £6.4bn, the initial order of 48 fighter aircraft (out of a long-term plan for 138), and the planned integration of carriers, warships, radar systems and support ships with navy personnel into two fully combat capable carrier groups.

This report focuses on the last three years of development since 2017 – a period that has seen the Royal Navy complete and launch two new aircraft carriers, receive and test the initial batch of aircraft, construct essential on-shore infrastructure, and undertake extensive training of sailors and aircrew.

Key highlights from the report include:

  • There was a further cost overrun of £193m on building the two aircraft carriers, equivalent to 3% of their total cost of £6.4bn.
  • The MoD has spent £6.0bn to date on 48 Lightning II fighter jets, of which 18 have been delivered on schedule. Port and military airfield facilities have now been completed.
  • The Crowsnest airborne radar system is 18 months behind schedule, affecting carrier group capabilities in the first two years of operation.
  • The MoD delayed seven of its 48 jets on order to 2025 to accommodate budgetary pressures, with the approved cost now at £10.5bn, a £1.0bn or 15% increase.
  • Funding has not yet been made available for enough Lightning II jets to support the carriers through to the 2060s as planned, with no commitment as yet to order the remaining 90 jets.
  • The MoD has been slow to develop the support ships needed to operate carrier strike group, with only one ship currently in operation – with delays in ordering three new support ships potentially hampering operations until 2028 or later. The MoD has also not provided the necessary funding for logistics projects and munitions.

The NAO reports that the MoD is making progress in delivering key milestones, albeit with some caveats.

  • Initial operating capability for one carrier group and 12 jets is expected to be achieved by December 2020 on schedule, albeit with more basic radar capability than originally planned.
  • There is a tight schedule to deliver ‘full operating capability’ by 2023 (two carrier groups with up to 24 jets) and the planned extended capability by 2026 to deliver a wide range of air operations and support amphibious operations worldwide. 
  • Significant questions need to be answered about the place of the carrier groups within defence strategy, the investment prioritisation necessary to ensure that they can operate for the planned life-span of 50 years, and a clear understanding of the full costs of operating the carrier groups in the context of a Defence Equipment Plan that is currently unaffordable (as reported in several other NAO reports).

The NAO conclude by making a series of recommendations for strengthening programme management, ensuring there is a clear view of future costs, and on monitoring new governance arrangements that have recently been put in place. The NAO also recommends transferring lessons learned from the Carrier Strike programme over to other major defence projects.

Gareth Davies, the Comptroller & Auditor-General for the United Kingdom and the head of the NAO, commented on the good progress made by the MoD to deliver Carrier Strike. But he also stressed the need for greater attention to be paid to the supporting capabilities essential for full operability, and the need for the MoD to get a firmer grip on future costs.

Martin Wheatcroft FCA, advisor to ICAEW on public finances, said:

“In many ways, the MoD receives quite a positive report card from the NAO on the good progress that it has made over the last three years, improving on much less complementary reports in 2017 and before.

However, as the NAO reports, the MoD continues to struggle to deliver major procurement programmes within a defence budget that is unaffordable and there remain significant issues that need to be addressed. The extent to which further funding will be provided in the long-delayed Spending Review later this year is yet to be seen.”

The NAO report ‘Carrier Strike – Preparing for deployment’ is available on the NAO website.

This article was originally published on the ICAEW website.

ICAEW chart of the month: Cabinet government

26 June 2020: The prime minister has announced a reduction in the number of government departments. How big is the cabinet compared to the rest of the world?

The news that the UK Government is reducing the number of government departments by one prompts the #icaewchartofthemonth to take a look at the size of government executives across the world.
 
As the chart highlights, with 26 members, the UK cabinet is one of the largest amongst major economies – comprising the prime minister Boris Johnson, 21 department ministers and four ‘ministers attending cabinet’. This does not include the Cabinet Secretary or other officials, meaning that cabinet meetings generally involve more than 30 people in total.
 
Compare that with the more compact 16-member German federal cabinet (Chancellor Angela Merkel and 15 departmental ministers) and the ten-member Chinese state council executive (comprising the premier Li Keqiang, five vice-premiers and four other senior departmental ministers).
 
It is certainly much larger than FTSE-100 company boards, where the average size is 11, and very few listed companies have more than 16 board members.
 
There is some debate around whether reducing the size of the UK cabinet would be more conducive to effective government. Some suggestions that the merger of the Department for International Development (DfID) with the Foreign & Commonwealth Office (FCO) to form the new Foreign, Commonwealth & Development Office (FCDO) in September is the first step on the way to that goal – with further mergers possible. However, although there will be one fewer departmental minister, there is a reasonable prospect of the minister responsible for development at the FCDO being invited to attend cabinet given its importance to the government’s global agenda.
 
Of course, merging departments is not the only way to achieve a slimmer cabinet – for example, the 31-member Russian cabinet (not shown in the chart) rarely meets as one body. Instead, there are regular meetings of the 10-strong prime ministerial group (the prime minister Mikhail Mishustin and nine deputy prime ministers) and occasional meetings of the 20-strong cabinet praesidium that includes the most senior ministers as well.
 
The UK Cabinet also works in this way to a certain extent, with critical decisions often being made in smaller groupings of senior ministers, such as the 9-member National Security Council, the 9-member Climate Change Committee or the 12-strong EU Exit Operations Committee for example. Canada, with its 37-member cabinet, also operates through a series of cabinet committees ranging from around 8 to 15 members. However, in both cases, the full cabinet still meets regularly and remains the formal executive body for authorising government actions.
 
With rumours of a cabinet reshuffle in the UK this autumn, it will be interesting to see whether moves to reduce the size of the cabinet will actually take place or whether we will see further development of cabinet committees as the places to be ‘in the room where it happens’.

This chart of the month was originally published by ICAEW.